Refinancing your mortgage is a big decision with many intricacies that need to be carefully considered. When you refinance your mortgage, you are essentially paying off your existing mortgage and creating a new one or combining your primary mortgage and second mortgage into a new loan. Although this sounds simple enough, you must be sure that you are prepared for the benefits and costs of New Jersey mortgage refinance.
Benefits of NJ Mortgage Refinance
There are many benefits to refinancing your current mortgage. Depending on your financial situation and credit score along with current interest rates, you may be able to save money each month and in the long term with New Jersey mortgage refinancing.
Lowered Interest Rate
If you have improved your credit score or you see a change in the market conditions, you may be able to get a lower interest rate on your monthly mortgage. Oftentimes, the lower your interest rate, the lower your monthly mortgage payment will be. By reducing your interest by only .5%, you can save money and build equity in your home more quickly.
Switch ARM to FRM
With an adjustable-rate mortgage (ARM), your monthly payments will increase and decrease with changing interest rates. If you are uncomfortable with the prospect of paying different amounts each month, refinancing could help you switch to a fixed-rate mortgage (FRM). A FRM will remain constant regardless of the changing interest rates.
Finance Large Expenditures
When you need money to finance large expenditures like home improvements or your child’s college education, you may want to consider cash-out refinancing from the equity built up in your home. Home equity is the difference between the balance of your mortgage and the value of your property. Refinancing for more than you owe on your home to pay for a great expense and receiving a cash payment is cash-out refinancing. It takes time to build the equity back into your home, however, so carefully consider this option.
Costs of NJ Mortgage Refinance
New Jersey mortgage refinance, not unlike refinancing in other states, also has its costs. When you are considering refinancing, you must realize that you may end up paying between 3 and 6 percent of your outstanding mortgage in refinancing fees. In addition to prepayment penalty fees, there are a slew of other fees that you may incur from mortgage refinance including:
- Application fees
- Loan origination fees
- Appraisal fees
- Inspection fees
- Attorney review/closing fees
- Homeowner’s insurance
- Survey fees
- Prepayment penalties
While there are many benefits to home refinancing, it is important to also consider if your overall gains will outweigh the upfront costs. If you are considering mortgage refinance, consult a trusted refinance advisor first.
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